The present ban on inter-bank dealings on foreign exchange will be lifted at the end of the current two-tier exchange system investigation has shown.
An informed source at the Central Bank of Nigeria, CBN, said that when this happens the CBN would deal like any other bank selling and buying following reign exchange over the telephone or telex to and from other participants in the inter bank market.
The source added that autonomous sources of funding is expected to play a significant role or even replace the official sources as the main supplier of funds to the market. The current bidding sessions will pale int insignificance and be phased out when this is realsed.
The bidding sessions are being used as a vehicle for injecting officials funds into the market.
The present two-tier arrangement is temporary and is expected to deal to the evolution of one large (foreign exchange) market for transactions, with significantly liberal features where access to foreign exchange will be determined by price.
Although rate convergence or unification is intended to bring about one uniform rate for transactions and the evolution of one single market for foreign exchange transactions, the level of the rate at the time of merger a convergence need not be the equilibrium or realistic rate at the time of convergence.
The source further said that Nigeria will still have exchange fluctuations that are inconsistent with an equilibrium path. On the other hand, the source stressed, when equilibrium is achieved after a period of successful adjustment, exchange rate variability with the marginal.
